The Australian Federal Court has found that Excite Mobile was engaged in false and misleading conduct by pretending to be debt collectors and telling customers that it could take their children's toys away.

The Federal Court has ruled that Excite Mobile had engaged in false and misleading conduct, unconscionable conduct, and undue coercion in selling mobile services.

The company had, in particular, targeted indigenous communities in the Cape York Peninsula, Queensland, Western Australia, and the Northern Territory. The Australian Competition and Consumer Commission (ACCC) took up the case after being approached by the Indigenous Consumer Assistance Network.

After locking customers into two-year contracts for mobile services where, in many places, the customer was not able to get coverage, Excite Mobile created a fictitious complaints-handling organisation called "Telecommunications Industry Complaints" that it directed complaints to, representing it as an independent complaints-handling body.

The company also sent over a thousand letters to customers, pretending to be from an independent debt collector, to chase up money owed to Excite Mobile and to pay an additional 20 percent on top. The company also threatened to repossess assets of its customers, including children's toys.

The contracts the customers were entered into would also only allow customers to make around 2 minutes worth of calls per day before being charged extra fees on top of the monthly charge. There was also a AU$75 cooling off fee and a AU$195 charge for returning a damaged phone, even if only the box was damaged.

Justice John Mansfield said that the contracts were "clearly unfair... to such a degree as to attract a strong adverse moral judgment". He said that Excite Mobile's marketing approach was "cynically indifferent to the interests of its potential customers, and was unconscionable".

The company's directors, Obie Brown and David Samuel, were found to have been directly, knowingly concerned in Excite Mobile's contraventions, and Excite Mobile agent Fiona Smart was also found to have been involved in the debt collection aspect of the case.

The ACCC is seeking injunctions against the company and that those involved will be disqualified from managing a corporation for five years.

"Inventing a fictitious complaints handling body to deceive customers, and creating a fictitious debt collector to coerce the customer to pay an alleged debt to Excite Mobile is unjustifiable and unacceptable," he said in a statement.